By Stephen Kirkland Feb. 2 (Bloomberg) -- Spanish bonds rose and the cost of insuring European government debt fell to a three-month low on optimism the region’s leaders will agree to an expanded bailout plan. U.S. index futures fell while cotton climbed to a record. The rally in Spain’s 10-year bond drove the yield 11 basis points lower at 8:35 a.m. in New York. Standard & Poor’s 500 Index futures lost 0.2 percent, while the Stoxx Europe 600 Index was little changed. The Markit iTraxx SovX Western Europe Index of government swaps slid seven basis points. One-month non- deliverable forwards for the Egyptian pound increased 2 percent. Cotton added 1.3 percent and raw sugar jumped 2.5 percent. Germany is making its agreement to an expanded rescue effort for Europe’s most-indebted countries conditional on tighter finance controls, said four officials involved in talks among Europe’s leaders before a Feb. 4 summit. U.S. companies added 187,000 jobs in January, more than forecast, according to a report by ADP Employer Services. Egyptian President Hosni Mubarak said yesterday he will step down later this year after almost 30 years of autocratic rule. “There’s been some tactically minded buying” of peripheral euro-area bonds, said Padhraic Garvey, head of developed-markets debt at ING Groep NV in Amsterdam. “There’s a degree of optimism about what’s going to happen” when policy makers discuss measures to stem debt. Spain, Ireland The extra yield investors demand to hold Spanish 10-year debt instead of similar-maturity benchmark German bunds dropped 10 basis points to 189 basis points. The Portuguese-German spread declined 11 basis points to 360 basis points. The yield on Ireland’s 10-year note slipped 23 basis points even after S&P downgraded the country’s debt. Three stocks fell for every two that rose in Europe’s Stoxx 600. Electrolux AB sank 8 percent after forecasting demand will rise 3 percent in North America and 2 percent Europe this year. Roche Holding AG dropped 2.1 percent after posting profit that missed estimates. Renewable Energy Corp. ASA surged 12 percent after fourth- quarter sales topped analysts’ estimates. Imperial Tobacco Group Plc rose the most in almost two years after saying it plans to pay more in dividends and reporting higher sales. The cost of insuring corporate bonds fell near the lowest level since April, with the Markit iTraxx Crossover Index of credit-default swaps on 50 companies with mostly high-yield credit ratings declining five basis points to 400. Jobs Reports U.S. futures fell after the S&P 500 yesterday gained 1.7 percent, its biggest rally in two months. The Dow Jones Industrial Average yesterday closed above 12,000 for the first time since June 2008. The yield on the 10-year Treasury note declined two basis points to 3.42 percent. ADP Employer Services was forecast to show a gain of 140,000 jobs, according to median estimate in a survey of 33 economists. It posted a 297,000 gain in December, the most since records began in 2001. Feb. 4’s jobs report from the Labor Department will say payrolls grew by 142,000, according to the average of 80 economists surveyed by Bloomberg. Wheat jumped 1.7 percent on speculation storms in the U.S., the world’s biggest exporter, will disrupt shipments. Raw sugar climbed to 34.79 cents a pound, the highest price since November 1980, as cane farmers in Australia braced for Tropical Cycle Yasi, poised to be the first category five cyclone to cross the Queensland coast since 1918. Brent crude traded above $100 a barrel for a third consecutive day. Cotton jumped to as high as $1.758 a pound. Emerging Markets The MSCI Emerging Markets Index climbed for a second day, rising 0.7 percent. Benchmark indexes in South Africa, Thailand, Indonesia and the Philippines rose more than 1 percent. Middle Eastern shares surged, led by a 3.3 percent gain in Dubai’s equity gauge and a 2.2 percent rally in Saudi Arabia. Egypt’s 10-year dollar bonds pared earlier gains, with the yield down three basis points at 6.47 percent, data compiled by Bloomberg show. Credit-default swaps insuring Egyptian debt were little changed at 341 basis points, after falling 82basis points yesterday, according to CMA. The pound appreciated against all but two of its 16 most- traded peers, after a report showed U.K. construction unexpectedly returned to growth in January. --With assistance from Claudia Carpenter, David Merritt, Michael Patterson, Michael Shanahan and Daniel Tilles in London. Editors: Stephen Kirkland, Justin Carrigan To contact the reporter on this story: Stephen Kirkland in London at skirkland@bloomberg.net. To contact the editor responsible for this story: Justin Carrigan at jcarrigan@bloomberg.net.

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